Fed and data to keep dollar on its toes

It’s certainly a busy week for the Federal Reserve and features not one, not two, but thirteen speeches from Fed members. With the Fed pre-announcing the beginning of their policy to wind down their balance sheet, markets will be watching for a gauge or measure on the pace of any sell-off of treasuries or other securities that could have a resulting impact on market prices. Should any Fed members signal that the treasury sales will have a direct impact on US bond yields and market interest rates, the dollar will be quick to adjust and this week will prove volatile.

As is usually the case, a speech from the Fed chair Janet Yellen will take the top spot in proceedings when she takes the stage on Tuesday.

Data-rich week could keep the dollar on its toes

With manufacturing & consumer sentiment data, housing sales numbers, the latest revision to US GDP as well as the Fed’s preferred gauge of inflationary pressure (personal consumption expenditure) all due this week, it’ll be difficult to cut through the noise and focus on what matters to the greenback.

GDP numbers are expected to be unrevised at 3% annualized, which shouldn’t pose too much of a threat to the greenback even if they fall foul of expectations. Given the backdrop of numerous Fed speakers dotted throughout the week, it’s the PCE numbers due on Thursday and Friday that could move the needle. Any significant slump against expectations will have investors questioning the validity of another rate hike from the Fed before the end of 2017 which could knock the dollar back from some of its recent gains.

Still busy further afield

It’s not just a busy week in the US, but also in Europe, with the fallout from Germany’s weekend election which sees Angela Merkel enter her fourth term as the country’s chancellor. What could change this time round is the make-up of her coalition which could now mean representatives from the Greens and the FDP enter government for the first time in years. Elsewhere, the latest rate decision from the Reserve Bank of New Zealand and appearances from Bank of England governor Carney and European Central Bank head Draghi could draw some of the limelight away from the US this week.

With a background in economics, fundamental and technical market analysis, Edward Hardy works with World First’s Economics and Currency Strategy team to assist and advise clients on transactional FX strategy and currency solutions. Over the course of the EU Referendum, Edward and team have advised clients large and small on the use of structured hedging products to help secure returns and accelerate performance.